UK’s economic confidence dips amongst global accountancy and finance professionals in Q4 2021

• Global economic growth continues, but at a more modest pace than in mid-2021
• ACCA and IMA believe 2022 will see further progress towards a more normal economic environment, but Covid and inflation are the main risks ahead for 2022

The latest results from a regular global survey of accountants’ and finance professionals’ views about the global economy reveals their economic confidence fell by 12 points in Q4 2021, due to the rapid spread of the Omicron Covid-19 strain.

Conducted during late November and early December at the start of the outbreak, the ACCA (the Association of Chartered Certified Accountants) and IMA^® (Institute of Management Accountants) Global Economic Conditions Survey (GECS) shows the confidence index dipped significantly by 22 points amongst UK respondents from 24 to 2 alongside falls for expectations about capital expenditure and employment.

The only index to rise in the UK was for orders, from -3 to 2. This index is the proxy for real economic activity and is one of relatively little change across all regions. This points to modest GDP growth early in 2022.

Lloyd Powell, Head of ACCA Cymru/Wales, said: “Accountants are often the first to sense the impact of economic activity, informed by the work they do on a daily basis sustaining economies and from the feedback from their clients, especially in the small business sector. The global picture is one of tentative optimism, but for the UK we can see very clearly the uncertainty of Omicron and inflation playing on respondents’ minds.

“In 2021 the UK economy grew by almost 7%, a significant bounce back after the 9.7% contraction of 2020. With the likely risk of rising inflation eroding real disposable incomes and squeezing consumer spending, our members continue to be concerned about the impact on small business survival and remain ready to advise on navigating recovery. The Chancellor’s Spring economic forecast will be essential to understand what lies ahead.”

ACCA says that while much of the rise in inflation can be attributed to one-off supply factors, there is a demand-pull element because some households have accumulated a large stock of ‘excess’ savings during periods of lockdown restrictions and these savings are a source of consumer demand. ACCA predicts GDP growth of around 4.5% this year, boosted by a recovery in business investment. 

Looking at specific jurisdictions, confidence fell the most in Western Europe by 28 points, which was the first region to see rapid spread of Omicron. Confidence increased modestly in two regions – Asia Pacific by five points and North America by 10 points. Only the Middle East recorded a fall in the orders index of six points, with South Asia showed the biggest increase at +8 points.

Explaining the prospects for 2022, Loreal Jiles, Vice President of Research and Thought Leadership for IMA, said: “ACCA and IMA believe that 2022 will see further progress towards a more normal economic environment with global GDP growth of around 4%. Features of this return to normalcy include reduced household savings offsetting withdrawal of COVID fiscal support, easing of supply shortages and continued growth in levels of employment. While Omicron may slow economic growth through the effect on consumer spending and worker absenteeism, the impact on global economic activity should be modest and is likely to be relatively short-lived.”

GECS Q4 2021 can be found here: https://www.accaglobal.com/gb/en/professional-insights/global-economics/gecs_q4_2021.html